Chapter 5 SOE Reform in China

If China wants to achieve a decisive great leap, two things must be accomplished: one is the urbanization of the population, and the other is the reform of state-owned enterprises.Before the 1990s, state-owned enterprises had always played a dominant role in the Chinese economy, and their industrial output value accounted for more than three quarters of the national industrial output value.This is a manifestation of the state-owned ownership of all important production enterprises in the planned economy.These enterprises are usually large-scale, burdened with housing, food, education, medical care and pensions for hundreds of thousands of employees.

The reform of state-owned enterprises was one of the reform priorities initiated by Deng Xiaoping.If the state-owned enterprises do not reform, no matter how well the private enterprises develop, the Chinese economy will not be able to achieve significant development.For a long time, the operation of state-owned enterprises has been used to link with the government.Enterprises' production targets and production quotas, and of course product pricing, are all formulated under the government's plan.State-owned enterprises basically cannot break away from the management system formed since the founding of New China. This involves a large number of vested interests and has become an inertia, and hundreds of thousands of people still depend on these enterprises for their survival.

It is very important for us to realize that although China has undergone impressive changes in the past few decades, since the end of the 19th century, Chinese society has been in constant turmoil, rarely enjoying calm, peace and security . In the 1840s, China was invaded by Western powers. Since then, internal and external troubles have continued, and millions of people have lost their lives. The Qing Dynasty perished in the early 20th century.Unrest continued for several years after that, claiming millions more lives. In the 1920s and 1930s, Shanghai was as prosperous as Europe, while the rest of China was mired in warlords.Later, Japan invaded China, and after the end of the Anti-Japanese War in 1945, the Kuomintang fought a civil war against the Communist Party with the support of the United States.The precise death toll of the war may never be known, but it must have been in the tens of millions.

For any country, if it experienced a Chinese War of Resistance Against Japan, the situation would definitely get out of control.After defeating the Japanese, the Kuomintang provoked a civil war in China.The American Expeditionary Force led by General Stilwell retreats from China in embarrassment.Of course, the end result of the war was the founding of New China led by the Communist Party of China in 1949.After the founding of New China, it has experienced agricultural system reform, years of famine, state-led industrialization and the "Cultural Revolution", and millions of urban youths went to the mountains and countryside...

It is one thing to want to breathe new life into state-owned enterprises, but quite another to do so.The reform of state-owned enterprises must not only set new goals, but also make the top managers of enterprises and local party leaders responsible for the realization of the goals. The best way to target.In theory, these measures are good, but in practice, they have not received any results.Many state-owned companies are industrial giants in the steel or power industries.The country's major financial institutions, especially the four major state-owned banks and their thousands of branches, are also state-owned enterprises.This means that even if state-owned enterprises cannot meet their goals, achieve profit margins, and do not have enough income to pay employees or buy new raw materials, these enterprises can still turn to state-owned banks for help.The result is that banks make loans to businesses, more money is pumped into businesses, and in most cases nothing happens.